oligopoly


oligopoly

Market situation in which producers are so few that the actions of each of them have an impact on price and on competitors. Each producer must consider the effect of a price change on the others. A cut in price by one may lead to an equal reduction by the others, with the result that each firm will retain about the same share of the market as before but with a lower profit margin. Competition in oligopolistic industries thus tends to manifest itself in nonprice forms such as advertising and product differentiation. Oligopolies in the U.S. include the steel, aluminum, and automobile industries. See also cartel, monopoly.

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